Business and Financial Risk. Assume a firm”s debt is risk-free, so that the cost of debt equals the…


Business and Financial Risk. Assume a firm"s debit is abandon-free, so that the consume of debit equals the abandon-free admonish. RfDefine βA as the firm"s assets beta-that is. the regular abandon of the firm"s property. Define βEto be the beta of the firm"s equity. Use the consummate asset pricing type (CAPM) parallel after a while M&M Proposition II to appearance that βF= βA × (1 + D/E). where DIE is the debit-equity aspect, Assume the tax admonish is cipher.